High-Level Policy Dialogue on Current Developments in the World Economy

Remarks by Mr. Sha Zukang, Under-Secretary-General for Economic and Social Affairs, Secretary-General of The 2012 UN Conference on Sustainable Development

Distinguished President of ECOSOC,
Colleagues from the International Financial and Trade Institutions,

It is a pleasure for me to moderate this dialogue on current developments in the world economy.

As moderator, I would like to share my personal perspective and raise some issues for discussion.

The good news is that the world economy is recovering from the global economic crisis.

But the recovery is fragile and its pace is slowing. As shown in the World Economic Situation and Prospects, in front of you, the United Nations expects output to grow by 3.3 per cent in 2011, and by 3.6 per cent in 2012, compared to 3.9 per cent in 2010.

But the pace of growth is uneven across countries. Output growth is high in developing countries, which has been driving global recovery. But this is losing steam, largely because of slow or faltering recovery in most developed countries.

Growth remains weak in many developed economies, which is a drag on growth in developing countries. The U-turn to fiscal austerity amidst persistent high unemployment has not helped their own citizens, let alone others.

In addition, macroeconomic policy stances among major economies remain divergent. This risks further slowing recovery; and has worsened financial volatility, as we see from fluctuating exchange rates… among other indicators.

Advanced countries are still in the midst of a jobs crisis. At the present pace of output growth, it would take another four to five years for employment to reach pre-crisis levels. At the same time, the number of people without a job for six months or longer continues to increase in many developed countries. Youth unemployment remains high.

In contrast, employment levels generally have returned to pre-crisis levels in many developing countries and economies in transition, especially in Asia. However, employment challenges remain – more poor people are in vulnerable jobs and young workers still can’t find decent work.

In addition, there are new challenges to global growth and development, including Natural disasters. Oil prices have surged. Since late 2010, food and oil prices have been rising again.

High food prices may be good for farmers, but it is the poorest persons who are affected most by increases in food prices. Food price hikes will worsen poverty levels and food insecurity.

The increased frequency of disasters, energy and food price hikes, and the uncertainty of economic recovery threaten the hard-earned progress made by developing countries. The challenges are greatest in the least developed countries, mostly in Africa and South Asia. Without additional efforts, several MDGs are likely to be missed. Additional resources will be needed, in particular, to accelerate progress towards achievement of the MDGs. But resources are also needed to finance large-scale investments that will make growth sustainable and resilient, especially for the LDCs.

Dealing with these risks and uncertainties poses serious policy challenges to all governments across the globe. Let me briefly highlight some.

First, for a number of developed countries, they should be cautious not to embark prematurely on fiscal austerity policies as the recovery is still fragile.

Second, we must continue to focus on jobs. In this regard, policies must be geared to support employment. These should be combined with policies promoting structural change and productivity growth. This will result in more sustainable economic growth over the medium and long term.

Third, none of these efforts are likely to succeed without strengthened international policy coordination.

Finally, to ensure sustainable development, including achievement of the MDGs, we must ensure that sufficient resources are made available to developing countries, including in the medium and long-term, while recognizing that many developed countries are taking austerity measures.

This brings me to a final issue. For this, I will put on my hat as Secretary-General of the UN Conference on Sustainable Development (Rio+20), to be held in June 2012 in Rio de Janeiro. In Rio, we will need to make major progress towards putting the global economy on a genuine path of sustainable development. Doing so will require fundamental technological and societal transformations

This, in turn, will require massive amounts of additional investments, especially in developing countries. Financing will be key to greening our economies to ensure environmental sustainability, and mitigating as well as adapting to adverse climate change impacts, as put forth in the 2009 and 2011 World Economic and Social Survey.

We know there is limited capacity to mobilize long-term financing in developing countries. Therefore, an important share of additional investments will have to be financed by international resource transfers.

A number of initiatives are being planned. However, we need to do much more. The success of Rio+20 hinges on a stronger commitment on finance and technology transfer.

The global economic and financial situation is being defined by the ecological change, and social and political developments of our time. It has become evident that economic development is not sustainable unless it is both ecologically and socially sustainable.

This is how we view the global development scene.

The world cannot afford inaction or a ‘go it alone’ approach. We need to institutionalize the framework for sustainable development within the multilateral system.

As I have suggested, there are concrete pathways to a sustainable recovery. Everyone stands to gain from this, but only if we do it together.

I thank you for your attention.